The Credit Cycle and the Business Cycle in Canada and the United States: Two Solitudes?

Pierre Siklos and Brady Lavender

Canadian Public Policy, 2015, vol. 41, issue 2, 109-123

Abstract: Recent events highlight the relationship between credit availability and aggregate output. Macroeconomic models for Canada are estimated to investigate links between non-price lending standards, business loans, and output. US macroeconomic and financial market conditions are allowed to impact the Canadian economy. Responses to financial shocks differ in the two countries. Real-time data have a significant impact on the results. The United States and Canada may be "two solitudes" insofar as the impact of credit conditions is concerned. Differences in the quality of banking supervision and in the effectiveness of monetary policies in the two countries may partially explain the results.

Date: 2015
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